Assessing MediPharm Labs’ Sales Agreement with Canopy Growth


Robin Lefferts

December 12th, 2018

Exclusive, News, Top News


According to Health Canada statistics, cannabis oils have been steadily increasing market share in Canada over the past couple of years as an alternative delivery method to smoked flower. The numbers are kind of startling. In September 2018, licensed producers sold 1,755 kilograms of dried cannabis to patients while oil sales reached 4,455 kilograms. What’s more, Health Canada plans to allow a wide variety of cannabis-derived products like edibles into the market in the fall of 2019. Edibles have been shown to be wildly popular in mature markets in the United States. Underlying these product categories is cannabis concentrate, the viscous sludge that results from extracting the active ingredients from the cannabis plant. Companies turn concentrate into more diluted oils and all kinds of other products, like gummies, beverages, and topical creams.

With market demand expected to continue its upward trajectory, MediPharm Labs (TSXV: LABS) is positioned as a concentrate and extraction expert. MediPharm is the first licensed producer in Canada to focus exclusively on oils and extracts. The company’s recent sales agreement with Canopy Growth is a prime example of MediPharm’s business model, though its magnitude may be misunderstood. Here is an attempt to sort through the deal and understand its implications.

The Agreement

Canopy has committed to buying 450kg of cannabis extract from MediPharm over the next 18 months, with an option to buy another 450kg. That’s it! But in a market that has been conditioned to large annual flower production numbers in the thousands of kilograms, 900kg doesn’t really sound that impressive. A more thorough understanding of concentrate and how it relates to end products is needed to properly assess the deal.

Cannabis Concentrate

MediPharm creates concentrate by extracting the active ingredients from cannabis. The concentrate consists of about 70% active ingredients (mostly THC and CBD), meaning that 450kg of concentrate carries about 315kg of active ingredients. That concentrate is then diluted into marketable products like the oils currently available in Canada. These oils come in a variety of concentrations and mixes of active ingredients, but suffice to say that more than 450kg of oils can be made and sold from 450kg of concentrate.

What the Market Offers

Let’s spin through a few cannabis shops to get a representative idea of what’s on the market. The numbers may blur together a bit, but we will endeavor to boil it all down in the following section… On CannTrust’s shopping site, three types of oils are offered with varying mixes of THC and CBD. All contain between 1,000mg and 1,100mg of active ingredient per 40ml bottle. All retail for $90.

The Ontario Cannabis Store offers a wider variety of products. The Plain Packaging Balanced Oil contains 480mg of active per 40ml bottle, retailing for just over $110. Aurora’s Indica Drops contain about 750mg of active per 30ml bottle, retailing for about $83. Hexo’s Oil Oral Sprays contain about 375mg of active per 15ml bottle, retailing for about $84.

Canopy’s own Spectrum Cannabis offers a wide variety of products as well, including softgels. The Red No. 2 softgels contain just over 300mg of active per $45 bottle. The Blue Cannabis Oil has 1,000mg of active per 40ml bottle, retailing for $90.

Translating the MediPharm Agreement

The Canopy contract guarantees the sale of 450kg of concentrate, translating to 315kg of active ingredients at a 70% concentration. One kilogram equals 1 million milligrams (apologies for the remedial math lesson), so MediPharm is selling 315 million milligrams of active ingredient. For the CannTrust oils, even using the higher number of 1,100mg of active per bottle, 286,363 bottles could be produced from that amount of active ingredient, which would generate $25,772,670 of revenue from sales at full retail.

Canopy could conceivably produce 1.05 million bottles of the Red No. 2 softgels resulting in $47,250,000 of revenue from sales at full retail. The Blue Cannabis Oil numbers fall more in line with the CannTrust calculations, producing 315,000 bottles and generating $28,350,000 of revenue at full retail.

Hexo’s Oil Oral Sprays offer a look at a different product category. 840,000 spray bottles could be produced utilizing 315 million milligrams of active ingredient, which would result in $70,560,000 of revenue at full retail.

No details of the sale price for the MediPharm/Canopy agreement have been released, so it would be foolish to guesstimate the expected revenue from MediPharm’s end. But the contract guarantees the 450kg of concentrate and allows for another 450kg option. As you can see from the above exercise, this is not a small deal by any measure.

With demand for oils on the rise, and the promise of future higher-margin product categories that utilize concentrates as their basis (edibles, beverages, personal care products), this first-of-its-kind agreement for MediPharm Labs is just an indication of the company’s potential.

Disclaimer

The above article is sponsored content. Emerging Growth LLC, which owns CannabisFN.com and CFN Media, has been hired to create awareness. Please follow the link below to view our full disclosure outlining our compensation: https://cannabisfn.com/legal-disclaimer/

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Robin Lefferts

Robin Lefferts has been involved in the legal cannabis industry since 2012, sometimes as an active participant and always as an interested observer.


Network Partners

Follow Us on Social Media

About CFN Media Group

CFN Enterprises Inc. (OTCQB: CNFN) owns and operates CFN Media Group, the premier agency and financial media network reaching executives, entrepreneurs and consumers worldwide. Through its proprietary content creation, video library, and distribution via www.CannabisFN.com, CFN has built an extensive database of cannabis interest, assisting many of the world’s largest cannabis firms and CBD brands to build awareness and thrive. For more information, please visit www.cfnenterprisesinc.com.

Disclaimer: Matters discussed on this website contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. CFN Media Group, which owns CannabisFN, is not registered with any financial or securities regulatory authority and does not provide nor claims to provide investment advice or recommendations to readers of this release. CFN Media Group, which owns CannabisFN, may from time-to-time have a position in the securities mentioned herein and will increase or decrease such positions without notice. The Information contains forward-looking statements, i.e. statements or discussions that constitute predictions, expectations, beliefs, plans, estimates, or projections as indicated by such words as "expects", "will", "anticipates", and "estimates"; therefore, you should proceed with extreme caution in relying upon such statements and conduct a full investigation of the Information and the Profiled Issuer as well as any such forward-looking statements. Any forward looking statements we make in the Information are limited to the time period in which they are made, and we do not undertake to update forward looking statements that may change at any time; The Information is presented only as a brief "snapshot" of the Profiled Issuer and should only be used, at most, and if at all, as a starting point for you to conduct a thorough investigation of the Profiled Issuer and its securities and to consult your financial, legal or other adviser(s) and avail yourself of the filings and information that may be accessed at www.sec.gov, www.pinksheets.com, www.otcmarkets.com or other electronic sources, including: (a) reviewing SEC periodic reports (Forms 10-Q and 10-K), reports of material events (Form 8-K), insider reports (Forms 3, 4, 5 and Schedule 13D); (b) reviewing Information and Disclosure Statements and unaudited financial reports filed with the Pink Sheets or www.otcmarkets.com; (c) obtaining and reviewing publicly available information contained in commonlyknown search engines such as Google; and (d) consulting investment guides at www.sec.gov and www.finra.com. You should always be cognizant that the Profiled Issuers may not be current in their reporting obligations with the SEC and OTCMarkets and/or have negative signs at www.otcmarkets.com (See section below titled "Risks Related to the Profiled Issuers, which provides additional information pertaining thereto). For making specific investment decisions, readers should seek their own advice and that of their own professional advisers. CFN Media Group, which owns CannabisFN, may be compensated for its Services in the form of cash-based and/or equity-based compensation in the companies it writes about, or a combination of the two. For full disclosure, please visit: https://www.cannabisfn.com/legal-disclaimer/. A short time after we acquire the securities of the foregoing company, we may publish the (favorable) information about the issuer referenced above advising others, including you, to purchase; and while doing so, we may sell the securities we acquired. In addition, a third-party shareholder compensating us may sell his or her shares of the issuer while we are publishing favorable information about the issuer. Except for the historical information presented herein, matters discussed in this article contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. CFN Media Group, which owns CannabisFN, is not registered with any financial or securities regulatory authority, and does not provide nor claims to provide investment advice or recommendations to readers of this release. CFN Media Group, which owns CannabisFN, may from time to time have a position in the securities mentioned herein and will increase or decrease such positions without notice. For making specific investment decisions, readers should seek their own advice and that of their own professional advisers. CFN Media Group, which owns CannabisFN, may be compensated for its Services in the form of cash-based and/or equity- based compensation in the companies it writes about, or a combination of the two. For full disclosure please visit: https://www.cannabisfn.com/legal-disclaimer/.

Copyright © Accelerize Inc. · All Rights Reserved · Privacy Policy · Legal Disclaimer

loading